‘Substantial’ Whistleblower Awards May Take A While, SEC Official Says

Federal securities regulators have only made two whistleblower awards in two years, but one official says to stay tuned.

Speaking at the American Bar Association’s annual conference, Michele Wein Layne, regional director of the U.S. Securities and Exchange Commission’s Los Angeles office, emphasized the time-intensive nature of sorting through the whistleblower tips the agency receives–roughly 300 in the 2012 fiscal year, from all 50 states and several dozen foreign countries.

The tips concern alleged securities law violations, from corporate reporting to market manipulations to investment fraud. The more complex they are, the more challenging–and the more time-consuming–the investigation is.

Of course, when the investigation concludes, the SEC’s job isn’t done. It must then take action, and a whistleblower can only receive his or her reward once that action yields more than $1 million in sanctions against the wrongdoer.

“We try to bring our cases as quickly as possible. They take a long time,” Ms. Layne said on Saturday. “It could be further out until you see some of those substantial awards.”

Created in connection with the Dodd-Frank financial legislation, the SEC’s Office of the Whistleblower offers a bounty of 10% to 30% of collected sanctions to whistleblowers who significantly helped the SEC’s investigation. Dodd-Frank also offers broad protections to whistleblowers against retaliation by their employer.

The SEC made its first whistleblower award last August, for nearly $50,000, to an individual who helped the SEC stop a “multi-million dollar fraud.” A second award, made this June, recognized three whistleblowers for tips about an investment fraud that ultimately sent a hedge fund chief executive to prison.